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Why do education loans attract the highest interest rates when the government stresses on the impetus of education?

I distinctly remember the union budget speeches of our Finance Minister and now the President of India Pranab Mukherjee and the current finance minister P Chidambaram. They both outlined the government’s focus of elementary education through theSarva Shiksha Abhiyan and theRight to Education Act. Speech after speech they stressed on the government’s commitment towards the education sector.

In P Chidambaram’s last budget speech, the word ‘education’ was used 15 times whereas ‘economy’ was uttered 13 times. However, in the 2010 budget speech of Pranab Mukherjee, he said the word ‘economy’ 19 times and ‘education’ 8 times. Inclusive growth? As part of Mukherjee’s inclusive development agenda, he proposed to increase the plan allocation for school education from Rs.26,800 crore in 2009-10 to Rs.31,036 crore in 2010-11.

“The Right to Education (RTE) Act is being implemented with effect from April 1, 2010 through the Sarva Shiksha Abhiyan (SSA). For 2012-13, I have provided Rs 25,555 crore for RTE-SSA. This is an increase of 21.7 per cent over 2011-12,” Mukherjee in 2012-13 budget speech said.
Chidambaram, in 2013-14, said, “Education is the other high priority. I propose to allocate Rs 65,867 crore to the Ministry of Human Resource Development, which is an increase of 17 percent over the RE of the previous year. The Sarva Shiksha Abhiyan (SSA) and the Right to Education Act are firmly in place. I propose to provide Rs 27,258 crore for SSA in 2013-14.”

One might argue that with the above mentioned allocations the government is dispensing its social duties. Education for all.

But is this education for all? Is this inclusive? What happens to higher education? What happens to students who dream to study more?

Of course I am not suggesting that the government should subsidise education at every level. But is it too much to expect realism in terms of affording higher education?

Now let’s look at the latest data available with the Reserve Bank of India. It says that during March 2012 to June 2013 period, the lending rates for education loans saw the sharpest decline of 63 basis points. Kudos! Now the bad part: the median lending rates of scheduled commercial banks for the education sector was 13.12 per cent in June 2013. In simpler terms, if you approached any private bank for an education loan, the interest rate it will charge you is 13.12 per cent. Even after the sharpest decline amongst all sectors, the lending rates for education were only second to credit card interest rates. Necessity versus luxury?

A home loan in June 2013 was available for 10.93 per cent, vehicle loan for 12.85 per cent and agriculture loan for 11.67 per cent versus an education loan, at 13.12 per cent. Credit card interest rates were at 26.67 per cent.

Turns out, socialist, democratic republic of India cares more about capitalism. What else could be the reason that a home loan and vehicle loan is cheaper than education loan?

The banks will tell you that the problem is with the students. They do not repay the loans and the bad debts that banks have to write off in the education loan segment are high. Therefore, as the risk is greater, the interest rates are higher. Instead of finding a solution as to why students are not able to repay their student loans, this is the solution the banks have found.

Now imagine such a situation with a big corporation? Banks would have bent over backwards to offer them a corporate debt restructuring (CDR) plan. No questions asked, interest rates lower, time period increased, more money pumped in, moratorium, etc. Kingfisher Airlines?

This story shows how CDR has increased from Rs 86,535 crore in March 2009 to a whopping Rs 2, 50,279 crore in June 2013.

Now let’s look at the RBI data on the deployment of gross bank credit by major sectors. In July 2012 and 2013,outstanding education loans grew to Rs 49,800 crore and Rs 54,500 crore, respectively The education loans, which are mentioned under the priority sector, as on July 2011 were at Rs 45,300 crore. Lowest after micro-credit at Rs 16,200 crore and export credit at Rs 33,100 crore out of the list of 10.

What does this show? The government’s impetus on education is not necessarily finding space with commercial banks?

The priority sectors or the areas important for the economic and social growth of India are identified to be agriculture, micro and small enterprises, education and housing. Interest rates for all of which are in double digits with education being the highest. Education loan, although described as the harbinger of India’s future and economic stability and growth, classified as a priority sector by the government and the RBI, is still mentioned under the ‘personal loan’ sections.

If education is supposed to uplift the people and with them their families and the economy on the whole, is it still a personal loan?

If the government’s allocation for education goes up year on year, if a student wishes to study more it becomes his personal ambition rather than an ambition for the nation?

A student who wishes to pursue his higher education abroad cannot do so because he doesn’t belong to a rich family and the interest rates that the bank charges on such loans is back breaking. Most banks offer education loan for higher studies abroad of upto Rs 20 lakh with a few public sector banks even offering Rs 25 lakh. But these loans are not without a collateral and understandably so.

But what happens to a student whose family doesn’t have a house to mortgage to the bank to secure the loan? Isn’t it the duty of the government to underwrite the loan for the underprivileged? Is the flight of one’s dream based on the money his parents or their forefathers earned?
If education is such a top priority for the government then the interest rates, the method of lending and government’s role should reflect that.

(Shubhashish is a journalist who is now pursuing Masters in International Studies and Diplomacy in London. Email: shubhashish@msn.com)

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Traffic is a synonym of Mumbai. Coupled with narrow roads and the potholes, which now I am beginning to believe are a part of an idea to help people save a trip to the moon or perhaps Mars.

What is it about the financial capital of India that the basic infrastructure of roads is in such a state? And if this is the state of roads in the so-called ‘best urban centre in the country’ I can’t even begin to imagine the state of roads in other parts.

The blood-boil is coupled by the fact that the moment you step out of the cities and hit the highways the roads are butter-smooth, although still dangerous. Our roads are such beautiful pieces of gems that they deserve to awarded the ‘best imitation of the moon’s surface’. And the irony that the minister for road transport and highways is Mr ‘Oscar’ Fernandes is just not a coincidence.

Just for the sake of the tone of this column, I decided to check the website of this ministry. Describing itself, the ministry states, “An apex organisation under the Central Government, is entrusted with the task of formulating and administering, in consultation with other Central Ministries/Departments, State Governments/UT Administrations, organisations and individuals, policies for Road Transport, National Highways and Transport Research with a view to increasing the mobility and efficiency of the road transport system in the country. e Ministry has two wings: Roads wing and Transport wing.”

Nowhere the epitaph speaks about the basic task of building roads. Unless the government believes that our roads are already built and are in order. Just like how the government has brought down poverty in India to 22 per cent by formulating an ingenious policy of lowering the Below Poverty Line (BPL).

Also, read the last sentence of ministry’s self-description closely. The first word is ‘e’. I believe they wanted to write ‘The’ but ‘Th’ must have fallen in the depth of the potholed roads.

Now let’s read what the “Road Wing’ of the ministry actually states as its objectives: ‘Deals with development and maintenance of National Highway in the country.’ The road to development manoeuvres through the highways, touches the cities, misses it till it catches the next highway. After all, India lives on the highways. Cities and villages are too hipsterisque.

The main responsibilities of the ministry again begin with the importance given the national highways through planning, development and their maintenance. By now I am hoping the government should also form a ministry to look into a direct helicopter services from cities to these highways because clearly those are only roads the government is interested in.

The second and the only point that talks anything about the roads that makes our insurance premiums payments cry, it says, “Extends technical and financial support to State Governments for the development of state roads and the roads of inter-state connectivity and economic importance.” If the conditions of our city roads are anything to go by, then NASA should contract the Indian government to supply the technology to recreate the moon and its craters on Earth.

As you can read in this article of 2010, Prime Minister Dr. Manmohan Singh outlined the spending on India’s infrastructure to the tune of $1 trillion in the 12th five year plan currently underway.

In the current and the second year of this five year plan, Singh finalised a spending of Rs 1,15,000 crore on the infrastructure sector, or roughly one-fourth of the total target of $1 trillion in these five years.

The road ministry had set an ambitious target of building 20 km of roads a day in 2009. However, in 2011-12 the average road construction, as this story suggests, was just half of it.In 2012-13, the road ministry failed to even meet the half way mark of 4400 km in awarding road projects.

Even in the current fiscal, the bickering between the ministry and the National Highway Authority of India (NHAI) continues on the model that the government should adopt to award the road projects. As per this story, a ministry official commented, “Just because PPP projects have not taken off in the recent past doesn’t mean we junk the model and switch over to cash-contracts. We need to innovate and try all options before taking such a step.”

This indicates, if nothing else, continued delays in the road construction in India. And if this is what is happening to the government’s blue-eyed highways which are just a tiny fraction of India’s vast road network, us city dwellers and village folk can continue to save our amusement park money by enjoying the bumpy ride every day.

(Shubhashish is a journalist who is now pursuing Masters in International Studies and Diplomacy in London. Email: shubhashish@msn.com)

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The path to industrialisation is laden with nails and scraps, especially if you happen to oppose it.

They say that the sole reason the sub-prime crisis did not hit India is because people here treat land and homes differently than the West. A home or a piece of land is near sacred in India. People in India dream of owning a house, one day.

What if one fine day, in the name of industrialisation, your government decides to throw you out of your dream? And ‘compensate’ you with four times the market value of your dream or two times depending upon the geography you dared to dream in.

Now of course you can’t be thrown out of your homes or your land can be snatched away from you if you belong to the 80% of the people who agree that a factory should be set up in your area. Because that is what the Land Acquisition Bill proposes. “In case of acquisition of land for use by private companies or public private partnerships, consent of 80 per cent of the displaced people will be required,” it says.

What we saw in Odisha with respect to the aluminium refinery of billionaire Anil Agarwal-controlled Vedanta Resources Plc is near legendary. Village after village rejected the mega-factory and chose to not part with their land and measly earnings. But this is democracy and is seen a triumph of democracy.

But isn’t this tilted against the minority? Sure, in an election, the person with the majority votes wins but does that mean he/she works only for the people who voted for him/her and neglects the others?

Of course not. Because the votes are secret.

However, this Land Acquisition Bill says that if 80% of the people agree for the factory then the factory will be set up on their lands. The rest have to just agree and take the massive compensation and find solace in money.

You might argue that the minority in this case, the 20%, shouldn’t be complaining because they are being paid wild money and the company will take care of their rehabilitation.

But the tribes of Odisha, just recently, showed you that money isn’t everything. They believed in their sacred hill and were not ready to part with it. Even though Vedanta would have offered them money which otherwise would have taken them a hundred years to earn (metaphorically).

Just because a majority was against Vedanta and its money this is seen a people’s win. What if only 20% felt that their land is too precious for them to part with? Wouldn’t they be labelled as anti-industrialisation? Anti-growth? Anti-India?

Getting every land owner to agree and part their land for a factory is indeed a utopian dream which is impossible to achieve. But at least let’s not treat India as China and those 20% as a mere percentage figure.

What we need is a policy that treats people as people and not numbers. What we need to understand is that just because a poor has land to his name and is yet finding it difficult to make ends meet, giving him a lump sum money and “rehabilitation” him is not a solution. This is not inclusive growth. Even though China enters our territory quite often, we must remember that we are not them. We are India. We are a democracy.

It is to be noted that the above point is only for the land acquisition by the private companies. For a private-public partnership, the consent is only at 70 per cent and for the government projects no consent from the landowners is required. And this means a forcible eviction.

For compensation to the land owners, the bill reads, “Once the market value is calculated, it is doubled for land in rural areas. There is no doubling of value in urban areas. Then, the value of all assets attached to the land (trees, buildings, etc) is added to this amount. On this amount, a 100% solatium, (i.e., extra compensation for the forcible nature of acquisition), shall be given to arrive at the final compensation figure.”

And the government, which is by the people, for the people and of the people, doesn’t have to take consent of the 80%. Public sector companies, or the companies owned by the government is absolved from this clause.

Just because we vote a government to power doesn’t mean that its every decision is for our good. Kudankulum and Jaitapur nuclear power plants are just two recent examples of how the people protested but the government still went ahead with its plans.

“To ensure, in consultation with institutions of local self-government and Gram Sabhas established under the Constitution, a humane, participative, informed and transparent process for land acquisition for industrialisation, development of essential infrastructural facilities and urbanisation with the least disturbance to the owners of the land and other affected families and provide just and fair compensation to the affected families whose land has been acquired or proposed to be acquired or are affected by such acquisition and make adequate provisions for such affected persons for their rehabilitation and resettlement and for ensuring that the cumulative outcome of compulsory acquisition should be that affected persons become partners in development leading to an improvement in their post-acquisition social and economic status and for matters connected therewith or incidental thereto,” reads the Land Acquisition Bill.

You can give a candy to a kid to pacify him but very soon he will finish it and the bawling will begin again.

Shubhashish is a journalist who is now pursuing Masters in International Studies and Diplomacy in London. Email:shubhashish@msn.com

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What is the job of the government? This is a broad question which has a broader answer: Welfare. Welfare of whom? Its citizens.

If we are asked to prioritise, on top we will and we should have the have-nots. The poor. The ones who cannot afford to spend even on basic necessities of life. The disadvantaged. For long the so-called elite and even middle class India has been raucously against reservations in educational institutes. What is happening in India is that the government is indulging in spoon-feeding people. The same is happening with the reservation in schools/colleges and the same is feared to happen with the Food Security Bill.

The vehement opposition of the FSB made me think whether we have added the term ‘Capitalist’ to ‘Sovereign, socialist, secular, democratic republic’ of India. Although you might argue that our sovereignty is compromised by neighbouring countries on a regular basis and we look on meekly, the government is privatising its companies, secularism is near farcical with the leaders of the who’s who of the Indian polity are smeared with communal blood and the freedom of expression is regularly curbed in the world’s largest democracy.

Isn’t it the job of the government to take care of its poor? In the name of economics, can you have a good night’s sleep thinking that you snatched food from people while you fine-dine night after night?

Just because the government’s missteps of the past couple of years has landed us in an economic jeopardy which is nearly unparalleled in the history of this nation, does this mean that the government should stop working towards the people who are likely to be the most affected in this complex economic crossfire?

The head of your family gets demoted, or worse, loses his/her job. Does this give them an excuse to stop providing for the family? No.

The high debt that the current government has run up cannot be an excuse to deprive people from their basic needs – food.

What the government needs to do is to get its act together and find money to fund this social welfare scheme.

Maybe the Food Security Bill will not wipe out hunger and malnutrition as envisaged by Sonia Gandhi. But does that mean you stop trying until you find the utopian wand?

Maybe this is a populist measure by the government to get votes in the elections next year. But by those standards, aren’t all welfare schemes populist?

Money has to be reallocated, moved and redeployed from higher up to the lowest common denominator. You tax the rich and subsidise the poor. What is wrong with it? Isn’t that the reason why our income-tax slabs go higher up as income goes up? Or the surcharge on the income of the rich that the government announced earlier this year? We saw the massive protests against those moves because the rich do not want to partake their money. But they want to poor to fend for themselves. Textbook capitalism.

To me, the question of the affordability of the Food Security Bill doesn’t even arise because this is a bill that has to be foot by someone.

The talk of inclusive growth is a hollow one unless the fruit of the GDP trickles down.

Of course footing this Food Security Bill is going to be expensive. But instead of debating its roll out, people and the industry should rather focus on ways to find money for it. The wasteful expenditures of the government need to stop.

ThisHindu Business Line article explains that in 2012-13, the government of India forego a whopping Rs5,73,627 crore to the rich and the mighty. Why has this become an intricate part of our fiscal policy?

This report by India Spend shows how India gave away tax breaks to the tune of Rs5,33,582 crore or 67% of its tax collections in 2011-12. Is this a prudent tax policy in the current times?

Shouldn’t the people who can afford to pay taxes be told that the honeymoon is over?

Corporate India has come out in numbers to oppose the Food Security Bill and its implications on India’s current account deficit.

The government has said that the expenditure on the Bill will not exceed the already budgeted ?90,000 crore for the current fiscal. In 2011,12 alone, the revenue foregone from corporate India was ?61,765 crore. Shouldn’t they be first setting an example by asking the government to let go of this walking stick?

Just in two years’ time, from 2010-11 to 2012-13, the tax foregone has increased by over Rs1,00,000 crore. Why is the government leaning towards the rich with such aplomb?

The clout of the lobby of the gold traders and jewellers can be seen from the fact that they strike for three weeks straight to protest the government’s tax move earlier this year. Pranab Mukherjee, the then finance minister’s assurance to look into the rollback made them call off the strike.

Do the poor in India have the might of this kind to fight for their rights? Ponder.

Shubhashish is a journalist who is now pursuing Masters in International Studies and Diplomacy in London. Email: shubhashish@msn.com

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If you pick up any financial daily or switch on a business news channel today you will find the reason for India’s falling economic standards — the current account deficit or the CAD. But is CAD really the culprit or are our ‘sentiments’ at play here?

According to the Reserve Bank of India (RBI) report, India’s CAD for the year 2011-12 was $78.2 billion. This swelled up by 9.6 per cent, to $87.8 billion in the year 2012-13. Barclays in a report dated August 23, 2013 says that India might surprise with a lower CAD for 2013-14.

“We believe India’s current account deficit has the potential to surprise favourably and have cut our FY 13-14 deficit forecast to $68 billion (from $80 billion). This is well below the consensus estimate of $76 billion and the average of $83 billion in the past two fiscal years. We also think our forecast could be conservative,” Siddharth Sanyal and Rahul Bajoria of Barclays in the report say.

If the CAD was really the issue then the current year’s projection should soothe investor nerves and bring back the investments. After all, the CAD has spiralled from $8 billion in 2007 to the current levels and from here any news of stabilising or lowering of CAD should be good news, right?

But then the second problem of tapering of the GDP hit India which raised the questions on funding the deficit yet again. The RBI expects India’s GDP to expand by 5.5 per cent in the current fiscal. The market believes that the number might actually be lower, at 5 per cent. This means that financing the CAD will be difficult. Even the RBI in its biannual report on the financial stability admitted that the “non-disruptive” financing of the CAD is a major challenge. It is this ‘sentiment’ that is causing the investors to abandon the ship.

Now, if we compare the rupee fall in the given two years, in 2011-12, the rupee depreciated by roughly 10 percent and by nearly the same figure on 2012-13. It is only in the last four months that the rupee fell from Rs 54 to a dollar to the current Rs 64 levels. So what changed so drastically in the last quarter?

What has changed than the fact that the US Fed might taper the printing of dollars, as explained by Vivek Kaul in this FirstPost story, which is making the foreign investors blink and take their money back home. But is this the entire truth?

According to this report of the Hindu Business Line, the foreign investors have pulled out over $10 billion from India in June-July alone. But has this money gone to the safer haven — the US? The story explains how this money has found its way to Japan, apart from the US.

This Bloomberg story details how currencies of all emerging markets have taken a beating.

After CAD, the most abused word in the financial world today is ‘sentiment’. Investors are already wary of the high CAD but over the last few months the ‘sentiments’ have changed. Investors are beginning to believe that the government might not be able to finance this CAD. And this is making them pull out their monies from India and deploy it elsewhere.

Even though the warnings of this rupee depreciation have been around since 2010 that the CAD will land up the rupee in a bottomless pit, such cries are usually ignored till the crisis comes knocking at the door.

The question arises, is the captain of the ship doing enough to plug the hole and stop the sinking? If he is then the ‘sentiment’ will revive and the foreign investors will be back with their precious dollars. And if he fails, then the rupee will sink further to the gallows which some in the investor community have already started whispering about.

This Mint article explains how emerging markets like Russia, Indonesia, South Africa and Brazil are in the same boat as India. Russia is the only market from the countries assessed in the story that has a surplus current account and yet its currency fell. Why?

Which should lead us to believe that CAD is not the only issue that is causing the currencies in the emerging markets to fall. They chose the path of growth over everything else. No one would have raised an eyebrow in the event of rising national incomes but since the tide has turned, the emerging markets, including India, are paying the price.

There are no two ways about how the government can boost the ‘sentiment’. By tackling the third most abused in the Indian financial space — the policy paralysis.

Although the government has woken up to the issue and is trying ways to fix the rupee fall, some feel that this is pushing India back to 1991 as explained by this story in the Economic Times.

Even in 1991, the government reacted when it was pushed to the wall. History repeats itself. Only after the rupee depreciation became a vertical fall in the last few months, did the government wake up to the monstrosity of the debacle. And as the situation is not as bad as 1991, the government’s response to stem the rupee fall has been tepid.

Election year is always seen as the one where the incumbent government doles out social welfare schemes to woo the voter. This government is following the same pattern. But if only it convinces the investors that the doling out of such schemes will mean more disposable income with the masses with a hope to revive the consumer confidence, the revival of our fortunes might be not that far away.

Long term investors are concerned about the the foundation of the economies and the faith in India’s growth story is still not shaken. However, to boost the economy, the Indian exporters need to take advantage of this otherwise dismal environment and make hay while the sun shines.

The way to bridge the CAD is to earn more dollars than the spend. Apart from the knee-jerk reforms that the government is undertaking to halt the rupee slide, if only it focuses on ways to help the Indian exporter, the solution to our problems might be closer than most have anticipated.

Sanyal and Bajoria go ahead to say, “We expect the INR at 61/USD in 6-12 months, which partly reflects a current account improvement. However, given the present fragile market sentiment, the underlying improvements in India’s current account may go unnoticed.”

The rupee wouldn’t have fallen to these levels had the foreign investors continued to pump in money. With them taking out money, the question marks show up around India’s ability to fund the CAD. The only way forward is by boosting the sentiments and reviving confidence in investors.

Shubhashish is a journalist who is now pursuing Masters in International Studies and Diplomacy in London.Email:shubhashish@msn.com

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I would have Manmohan Singh, Navjot Singh Siddhu, Narendra Modi, Barack Obama, Aamir Khan and myself in the WeChat group.

I think this is the most explosive combination of randomness one can ever think of. Imagine, a sardar who doesn’t speak versus a sardar who won’t stop. Narendra Modi will troll Obama for not letting him visit the US and Aamir Khan will be busy figuring out how can WeChat be more methodical than his acting preparations.

I will just be the moderator of this absolutely cracker of the WeChat group. As a guest member, I will also add Rahul Gandhi to the group. Manmohan Singh will pronounce him bigger than Obama and Gandhi will pay Rs 1000 to Modi. One just has to sit back, relax and see the fun that will unfurl.

There is no dearth of topics for them to talk about. Obama will help Manmohan Singh in write a speech but it will be a problem as our PM doesn’t open his mouth. Rahul Gandhi will also fail at it because he doesn’t believe in pre-written speeches and always makes a fool out of himself. Singh won’t have this luxury as he doesn’t need to speak to come out stupid.

At this point, Modi will start giving a fiery speech which will shut up everyone. Obama will troll Modi with the American visa rejection letter for the Gujarat CM.

Aamir Khan will be busy noting everything down to use as the basic premise in his next film. I will live tweet this WeChat group’s absolutely hilarious events.